Pakistan vulnerable to instability in global economy: Daily

Islamabad, Aug 26 (IANS) The sharp swings on the stock market coupled with pressure on the rupee is a reminder that Pakistan remains vulnerable to instability in the global economy, a leading daily said and added that “it is best to be prepared”.

An editorial “Financial market gyrations” in the Dawn on Wednesday said that for the past one year at least, a series of economic crises have been roiling the global economy to which “we in Pakistan have been little more than spectators”.

“But this week, the sharp volatilities of the international economy briefly landed on our shores and triggered powerful adverse movements in the financial markets,” it said.

The daily said that the stock market saw falls that rekindled memories of 2008, and the exchange rate has also been coming under increasing pressure.

“For now, the stock market seems to be on a rebound, but the volatilities could return very quickly since the crisis in the international markets is far from over.”

The editorial said that the exchange rate on the other hand is continuing to feel the stress.

“The sharp swings on the stock market coupled with pressure on the rupee is a reminder that Pakistan remains vulnerable to instability in the global economy, and it is best to be prepared,” it said.

The editorial said that as a first step, the government should allow the rupee to find its own value. “Investing too much importance in a strong currency is far too old-fashioned a way to view the exchange rate.”

It went on to say that the last “such bail-out following 2008 had to be hastily arranged and was of doubtful merit”.

“It would be better this time, if recourse to public funds should become necessary to prevent systemic risk, for strong guidelines to be in place for transparency as well as to ensure that the funds are not appropriated by the big brokers,” the daily said.

The editorial noted that the sharp volatilities roiling the global markets are escalating and “it would be a grave mistake to seek solace in the notion that Pakistan will remain insulated from these developments”.

“Nobody knows where the volatility will end, and nobody expects that the government can do much to keep it from impacting the country. But a few preparatory steps can go a long way to ensure that the government works to safeguard the public interest should matters deteriorate, rather than have its actions dictated to it in the thick of the crisis by a small cabal of brokers,” it added.